Rupee sees best week in more than 3 years on back of India-US trade deal

Forex reserves at record high of $724 billion

The rupee witnessed its best week in more than three years, since the week ending January 13, 2023, on the back of the trade deal announcement with the US.

 

The local currency, however, depreciated on Friday to settle at 90.67 per dollar, against the previous close of 90.36.

 

After witnessing sharp appreciation post the trade deal announcement, the local currency remains torn between optimism and caution as the market awaits the fine print of the trade deal.

 

“The rupee appreciated sharply post US trade deal announcement, but the dollar buying continued from the next day because the uncertainty is around the fine prints of the deal. The dollar buying continued today (Friday) as well because of caution,” said a dealer at a state-owned bank.

 

Reserve Bank of India (RBI) Governor Sanjay Malhotra said at the post-monetary policy press conference that the central bank generally stays away from intervening in the foreign exchange market, whether depreciation or appreciation, but clarified that this would not be the case if speculative pressures were to build up. 

 

“Whether it is a movement or depreciation or appreciation, generally, we stay away. However, it doesn't mean that we will stay away even if there is speculation getting built in,” he said.

 

He further said the rupee is witnessing a phase of appreciation, but there is no indication, either currently or going forward, of any speculative position build-up.

 

In the absence of such pressures, the RBI will allow market forces to play out and assess the direction of the currency, whether against the dollar or other major currencies.

 

Meanwhile, India’s foreign exchange reserves rose to a record high of $723.77 billion in the week ended January 30, latest data from the RBI showed. The total reserves increased by $14.36 billion during the week, highest weekly gains since March 7, 2025, on the back of a rise in gold reserves.

 

The previous record high of $709.41 billion was hit during the week prior to the reported week. In the last four weeks, foreign exchange reserves have increased by $37 billion.

 

Gold reserves increased by $14.59 billion to $137 billion in the reported week. However, gold prices decreased by 1.9 per cent to $4,894/OZ during the reported week.

 

“The increase in fx reserves is due to a revaluation gain of $20.4 billion . Rbi net sold 6.3bn during that week,” said Gaura Sen Gupta, Chief Economist at IDFC FIRST Bank.

 

On the other hand, foreign currency assets decreased by $493 million during the week. Expressed in dollar terms, foreign currency assets reflect the impact of appreciation or depreciation in non-US currencies, such as the euro, pound sterling, and yen, held as part of the foreign exchange reserves.

 

During the reported week, the Special Drawing Rights (SDRs) were up by $216 million to $18.95 billion. India’s reserve position with the IMF was also up by $44 million to $4.74 billion during the same period.

 

In the current financial year so far, India’s foreign exchange reserves have increased by $59 billion.